Greece spends more on pensions than UK

State pensions are one of the biggest expenses for the British government. However, new figures from the Organisation for Economic Cooperation & Development (OECD) showed that the United Kingdom (UK) spends less on pensions than most other developed countries.

In 2011 Britain spent less than 12pc of its total government budget on state pensions, putting it below the 18pc average across OECD countries.

The countries spending the highest proportion of their public money on pensions are Italy at 31.9pc, Greece at 28pc and Portugal at 26.4pc.

This is down to these nations’ ageing populations and the economic meltdown they have suffered since the financial crisis, which has caused other state spending to shrink.

Iceland spent the lowest proportion of its government funds on pensions in 2011, at 4.5pc.

Tim Reay of accountancy firm PwC said countries in northern Europe tended to have smaller, “welfare-style” state pensions that benefited the poorest most. Across Southern Europe, however, state pensions were more generous and provided a percentage of people’s salary, much like a final salary private pension.

According to the OECD, pension systems “differ substantially” across its member countries, but face the same main difficulty: remaining financially sustainable while delivering adequate pension income.

In a report it said: “The economic crisis in 2008 developed into a fiscal crisis in many countries. These difficulties have led to substantial changes and reform of pensions.

“The current need to reduce government debt to more sustainable levels and the high level of public pension expenditure in many OECD countries imply that additional pension reforms are likely to figure prominently on the policy agenda.”

As a result of these challenges, most of the OECD countries have been very active in reforming their pension system over the past two-and-a-half years, it said.